Filing for bankruptcy can feel overwhelming, but for many people in Mankato, MN, it represents a genuine fresh start — a legal pathway out of crushing debt that has become impossible to manage. One of the most important things to understand before filing is which debts can actually be eliminated (discharged) through bankruptcy and which ones will follow you regardless of what chapter you file under. Knowing the difference can help you make a smarter, more informed decision about your financial future — and working with experienced bankruptcy lawyers in Mankato MN like the team at Behm Law Group ensures you get the clarity you need before taking that step.

Understanding Bankruptcy Discharge

A bankruptcy discharge is a court order that legally eliminates your personal liability for certain debts. Once a debt is discharged, creditors are permanently prohibited from taking any collection action against you for that debt — no more calls, no more lawsuits, no more wage garnishments. However, not every debt qualifies for discharge. The U.S. Bankruptcy Code specifically outlines which debts survive bankruptcy, and understanding these categories is essential before you file.

Debts That CAN Be Discharged in Bankruptcy

The good news is that many of the most common types of consumer debt are eligible for discharge. Here is what bankruptcy can typically wipe out:
  • Credit card debt — Balances owed to Visa, Mastercard, store cards, and other revolving credit accounts are among the most commonly discharged debts in both Chapter 7 and Chapter 13 bankruptcy.
  • Medical bills — Unexpected medical expenses are one of the leading causes of bankruptcy in the United States, and they are fully dischargeable.
  • Personal loans — Unsecured personal loans from banks, credit unions, or online lenders can be eliminated through bankruptcy.
  • Utility arrears — Past-due balances on electricity, gas, or water bills can generally be discharged, though you may need to pay a deposit to continue service.
  • Lease obligations — If you have broken a lease or walked away from a rental agreement, the resulting debt may be dischargeable.
  • Some older tax debts — Federal income taxes that meet specific age and filing requirements may qualify for discharge in certain cases.
  • Deficiency balances — If a lender repossessed your car or foreclosed on your home and sold it for less than what you owed, the remaining balance may be dischargeable.
  • Civil court judgments — In many cases, judgments entered against you in civil lawsuits (outside of fraud or intentional harm) can be discharged.

Debts That CANNOT Be Discharged in Bankruptcy

While bankruptcy offers significant relief, certain debts are non-dischargeable under federal law. Filing will not eliminate these obligations:
  • Student loans — This is one of the most misunderstood areas of bankruptcy law. Student loans are almost never discharged unless you can prove "undue hardship," which is an extremely difficult legal standard to meet.
  • Child support and alimony — Domestic support obligations are completely protected from discharge. You will remain fully responsible for any past-due and future payments.
  • Most tax debts — Recent income taxes (generally those less than three years old), payroll taxes, and tax penalties typically cannot be discharged.
  • Debts from fraud — If a creditor can prove you incurred a debt through false pretenses or fraud, that debt survives bankruptcy.
  • Fines and penalties owed to government agencies — Criminal fines, traffic tickets, and court-ordered restitution payments cannot be wiped out.
  • Debts from DUI-related injuries — If you caused personal injury or death while driving under the influence of alcohol or drugs, that liability is non-dischargeable.
  • Debts from willful or malicious injury — Obligations arising from intentional harm to another person or their property are not eliminated through bankruptcy.
  • Retirement account loans — Loans borrowed against your 401(k) or pension plan are generally not dischargeable.

Chapter 7 vs. Chapter 13: Does It Matter?

Yes — the type of bankruptcy you file can affect which debts get resolved and how. Chapter 7 (Liquidation Bankruptcy) moves quickly — typically wrapping up in three to six months. Eligible unsecured debts are fully discharged, but you may have to surrender non-exempt assets. It is best suited for individuals with limited income who need a fast, complete discharge of qualifying debts. Chapter 13 (Reorganization Bankruptcy) involves a three-to-five-year repayment plan. It allows you to catch up on mortgage arrears, keep more of your property, and pay back non-dischargeable debts like recent taxes over time in a structured way. At the end of the repayment period, remaining eligible unsecured debts are discharged. The right chapter depends on your specific income, assets, and the types of debts you carry.

What Happens to Secured Debts?

Secured debts — like your home mortgage or car loan — work differently. Bankruptcy can discharge your personal liability for these debts, but the lender's lien on the collateral remains. This means:
  • If you want to keep your home or car, you generally need to continue making payments or reaffirm the debt.
  • If you surrender the property, the discharge eliminates any remaining balance owed after the lender sells it.
Understanding how secured debts interact with bankruptcy is one of the many reasons having qualified legal guidance is so important. Bankruptcy law is more nuanced than it appears on the surface. Debt classification, exemptions, means testing, and filing requirements vary significantly from case to case. A decision that makes sense for one person in Mankato may be entirely wrong for another. That is why speaking with knowledgeable bankruptcy lawyers in Mankato MN before you file is always the right move. At Behm Law Group, we take the time to review your complete financial picture — your income, your debts, your assets, and your goals — before recommending any course of action. We believe that informed clients make better decisions, and we are committed to walking you through every step of the process with honesty and care.

Contact Behm Law Group Today

If you are struggling with debt in Mankato, MN and wondering whether bankruptcy might be the right option for you, do not wait. The sooner you get the right information, the sooner you can start moving forward.

Behm Law Group is here to help you understand your options, protect your rights, and guide you through the bankruptcy process from start to finish. Contact us today at (507) 387-7200 or email us at 📧 stephen@mankatobankruptcy.com to schedule your consultation.

Reach out today to schedule your consultation — because the path to financial freedom starts with one conversation.

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